• Under Capital Allowance, Solar PV system could categorised as Plant & Machinery and is eligible for depreciation over the period of 6 years.
• Capital Allowance (CA) is seen as a deduction from “adjusted income” for certain types of capital expenditure provided under Schedule 3 of the Income Tax Act 1967. It comprises the following types of provisions:
  • Initial Allowance (IA – for the first year allowance),
  • Annual allowance (AA - for subsequent years until the full amount is availed),
  • Balancing allowance; and
  • ​Balancing charge.

• Apart from the usual Capital Allowance for Solar PV system as company assets, there is also additional tax incentive called Investment Tax Allowance (ITA). It is stated that:-
• ​Investment Tax Allowance (ITA) of 100% on qualifying capital expenditure incurred within a period of 5 years. This allowance can be set-off against 100% of statutory income for each year of assessment
• Depending on Statutory Income of the company, ITA could be utilised in full in the first year of assessment.
• The Prime Minister, under Malaysian Budget 2010, extended the ITA application period for renewable energy until the 31 December 2015. With Capital Allowance and Investment Tax Allowance incentives given to companies that generate energy using renewable sources, this is effectively double tax deduction for investment in Solar PV system!

*For Malaysian market only